A Guide to Understanding Property Inspection Reports and Disclosures

The important property inspection and disclosure process will be underway as soon as you sign the purchase contract. Your contract and state law require most Sellers to disclose information about the property to the Buyer. Here is a brief summary of the standard documents with a description of how they work to educate the Buyer about his purchase. Remember, no two sales are alike; this is only a sample of items you might receive in a typical residential transaction. Talk to your real estate agent or attorney if you have questions about these documents.

Real Estate Transfer Disclosure Statement (TDS)

Sellers are required to furnish prospective buyers with a complete disclosure of all known defects which might affect the value, desirability, or safety of the home. This information informs buyers of the condition of the property they are buying and protects the seller by minimizing the chance of claims or disputes after the closing.

Natural Hazard Disclosure

This report identifies natural hazard areas which affect the property, including fire and flood zones, earthquake fault zones, and City and County natural hazards such as landslides. Some reports supply property information other than natural hazards, such as airport noise zones, and Megan’s Law and Mello-Roos tax district information.

Structural Pest Control Inspection or Termite Report

This inspection discloses evidence of termites or other types of wood-destroying pests and dry-rot. The inspection report and corrective work expenses are negotiable and will be specified in your Purchase Contract.

Physical Inspection

The physical inspection provides an overall assessment of the present condition of the property. It includes such items as exterior siding, paint, flooring, appliances, water heater, electrical service, furnace, and roof. This inspection is typically paid for by the Buyer.

City Property Inspections

These requirements vary widely among cities. Some cities require that buyers receive a report of residential building records for the subject property prior to closing. Others have water conservation, retrofit, and smoke detector requirements. Your real estate agent should be familiar with the specific inspections which affect your property, and your escrow officer may provide assistance by ordering the reports or inspections early in the escrow process.

Homeowners Association Documents

Typically, your escrow officer will request a package of documents from the association’s management company. These include the governing documents of the association such as the Bylaws and Covenants, Conditions, and Restrictions (CC&R’s) as well as important financial information and property transfer requirements which can affect both Buyer and Seller. A careful study of the CC&R’s is time well-spent for a Buyer. The covenants or agreements expressed in this document may have a significant effect on the buyer’s use and enjoyment of his property. The management company will also provide a statement which discloses the status of the seller’s account and the fees which must be paid to complete the transfer process.

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